tv Nightly Business Report PBS September 10, 2013 1:00am-1:31am PDT
>> this is nightly business report, with tyler matheson and suesie garing. >> you get close to iconic landmarks, to local life, to cultural treasures. vikings river cruises. stocks soar on deals here at home, and worry that a strike against syria is imminent. >> and lawmakers back, making key decisions on everything from syria to the budget. and issues that will impact your money. >> changing benefits in a growing trend, ibm and time warner plan to move their employees to insurance exchanges, the companies save
money but is it good for former workers? all that and more tonight on nightly business report for monday, september 9th. >> good evening everybody, i'm tyler matheson. >> the markets kicked off this week higher, sending the dow back up to the 15,000 mark once again, following the strong economic growth out of china, and easing worries about an imminent u.s. military strike against syria, and we'll talk more about those developments in syria in just a moment. with all ten s&p sectors closing today, the dow shot up 140 points, its biggest one day gain in nearly two months, the nasdaq was up, seeing strong gains in the s&p 500, which added 16. >> the crisis in syria took an unexpected turn today as congress came back after a
recess, the syrian government responded positively to a russian proposal for the assad regime to turn over the chemical weapons, which would destroy them. the white house said it would take a long, hard look at the idea. john harwood takes a look, john, what can we expect from the president when he addresses the nation, especially in light of the new developments today. >> well, look, the president is staring into the teeth of the public opposition in view of these strikes. so i would expect him to address the potential for this as a resolution, just as the representatives of his administration grabbed onto it to today. hillary clinton said they would take a significant step if it was actually done. the foreign policy officials from both political parties said if you could make sure they were credible inspections and were under international control, would be possible as the
president was ambivalent about using middle force. >> and if it does come, will it be expected to effect a tight change? >> sue, it is not clear if in fact there is a sort of deal on this subject, that we have to watch and see. we didn't expect it today, we don't know what is going to happen in the next 24-48 hours, but there is no assurance that congress is going to go ahead and vote anyway. remember, a lot of members didn't want to be put on the spot, didn't want the president for ask for their authority. so i think those that were expected to carry the ball and get a vote may welcome not having to vote. >> john, there is a lot of moving parts in washington today, obviously, first and foremost is syria, but soon over the horizon comes the discussions on closing the government or extending funding for the government to operate. where does that stand? >> well, that is something they
can't avoid voting on, the government runs out of money in september. all signs point to both sides agreeing on a relatively clean extension of existing funding levels for a couple of months, perhaps through the end of the year to give them time to negotiate. that doesn't settle the issue of the debt limit which has to be raised by mid-october, according to the treasury. and exactly how that will be resolved, given the republicans' insistence that they need budget cuts, not clear at this point. >> all right, john, john harwood reporting from washington, thank you very much. and here to talk about congress's first day back on the hill is andrew friedman, a principal at the hill. good to see you. john mentioned the debt limit, several very important fiscal issues that need to be addressed. overhanging that is the crisis in syria, how much will that affect congress regarding the
crisis and the address? >> well, it has the potential to do that. john is correct. maybe we have changed the decision to go into syria, and go another route. but congress has precious little time to act, it is only in session for two months. in october it has to deal with the debt limit. i think more than that, syria, it has the potential to increase the rancor in congress, and that is not the attitude you want as you head into debating the fiscal issues. >> there is an awful lot here, andy, that suggests deja vu. what are the possibilities that the debt limit and the funding issues end up spilling through to the end of the year and we end up looking at the kind of christmas bargain we had last year? >> tyler, i think there is a very high possibility of that. i wouldn't be surprised if john boehner pushes off the funding issue until mid-december. maybe the debt ceiling gets a
modest push-off as well, they let the government continue to borrow. and we're right back in something like that the fiscal cliff issue, i don't think it is as serious, but we could be right back where we were. >> the market doesn't necessarily like indecision, and if they think we're going to end up with the kind of cliffhanger like the last time around, that could create volatility. will that concern be replaced by the market issues? >> well, it will be volatile, the market at best will see a short-term solution, kicking the can down a very short road. and that means we'll have to revisit it, as tyler said. and you add that to the volatility, and syria, and the market will have concerns. the compromise will be reached here. we're not going to default on our debt.
so the volatility will end and we should see the market come back to where it started, all things being equal. but it will be a bumpy ride. >> one of the issues has to do with the entitlement and the spending, and one aspect is particularly with the social security, has to do with how the cost of living adjustments are calculated. on which level of inflation are they based. where do you think it will end up? and the president has indicated at least some sort of willing innocence rega ness regarding the chained cpi. >> yes, i think that will all come into play later this year. the chained cpi simply acknowledges that when the price of something gets too high, we don't just buy it, we wait for something cheaper. as you pointed out the president said he would accept the rate of
growth that would keep the social security benefits in the future lower if we had some tax changes. and i think we could have some tax changes by simply just closing loopholes, we don't have to get into the debates of rate mortgages and deductions. close the loop holes and there you have your compromise. >> thank you, andrew friedman. one thing policy makers seemingly don't have to worry about quite as much right now is the economy. the latest survey from the national association for shs economics says the u.s. economy will grow by 3% next year and that will be a significant step up from this year. the widely expected group expects more jobs to be created and inflation to stay low. >> gas prices, though are inching higher. the latest survey found that gas rose 2.16% in the last two weeks, bringing the average cost
to 3.58 a gallon, that coincided with the spike in crude oil prices. and heading lower is the price of mortgage loans, officials at the federal housing finance agency are looking to lower the maximum housing loans, that were back during fannie mae and freddie mac. the idea is to wean mortgages off government support and let private companies take a bigger role in guaranteeing home loans. meanwhile, wells fargo, the nation's fourth largest bank says it expects to make fewer loans in the next quarter. even though it is the nation's largest longer, they will see a drop in loans due to the rising interest rates. last week, in a story about j.p. morgan chase bpg getting out of the student loans business, we reported that they stopped accepting requests for student loans, but in fact, wells fargo is still in the business with about $11 billion
worth of student loans. and from wall street to main street, everybody is watching what apple plans to unveil. the spotlight will be on tim cook, the ceo, shareholders and others would like to see apple, with new products and services. john fort has a preview. >> big day for am ceo tim cook and the iphone with the company's reputation for innovation on the line. for the first time, apple watchers expect to see two iphones, the more affordable and colorful 5 c which may help to expand apple's market share. >> market share is important, you have to have high unit value and high market share in order to get the best investments ultimately. it really does matter. it will be good for apple and ìc share went up. >> and they expect the 5 c to come in five colors, yellow, red, blue, green and white. in the past, new iphones have
started at about $650 with the carrier subsidiary. what is not clear is if it will replace the iphone 5, there is a balance involved. price it too high and people we say it is too expensive for emerging markets, price it too low, it could canonize the sales, whichever way it goes it is sure to effect the sales on nokia, just as it is starting to gain ground. >> so to combat samsung and apple feels like a good place, because if you take a look at the android market right now and the other players in the android market environment, it is a tough slog. >> we'll have to see if that make makes it tougher, i'm john fort. an interesting day tomorrow. and still ahead tonight, some of the country's biggest employers are changing the way employees get health care, so
will more companies follow? and what does it mean for you. plus, a look at how the widely held stocks performed today. carl icahn is very long in the towel, giving up his big fight to take over the big computer maker, del, just before they were scheduled to buy out on the company founder, michael del, icahn admitted it would be almost impossible for his rival proposal to prevail. an ultraluxury retailer
getting a new owner, privately owned neiman marcus, best money for his catalogues of high priced gifts, being bought out by the california owner and the canadian pension plan investment board. and today, molex, maker of electronic companies, will be acquired by the privately owned coke industries for more than $7 billion, the deal diversifies the holdings, which include paper cups and dixie cups, shares of molex, more than 38%, 33 today, making it the best performi inin ining stock in th. >> and the investors focusing on double digit revenue growth and higher prices, seeing an increase in prices on the back log, a decline in revenue and
cancellations, and that pushed the stock higher to 2.15. and isis pharmaceutical, teaming up, to work with therapies that treat brain disorders, they have the exclusive right to the technology and will pay $100 million up front. isis will be responsible for drug discovery, this is the fourth deal between the two companies just in the last two years, sending biogen up more than 1% to 228.86. shares of blackberry rising, an investor may be close to buying the smartphone maker, according to times, their largest shareholder has put together billions in backing from canada's pension funds for a possible deal, pushing blackberry's stock up to $11.53.
and shares of delta higher as the stock gets ready. delta will replace bmc software, and stocks often move higher when they're added to major indices, delta rose 9%. and some big health care changes coming to some big companies very soon. time warner and ibm, both announcing plans to move their retirees to private insurance exchanges, bertha coombs has more. >> reporter: big blue is making changes in how it pays for retiree health coverage. >> we projected health care costs in the current ibm plan will triple in the next few years, largely impacting your
premiums and out of pocket costs. >> reporter: instead of offering a medicare supplement itself, ibm will give the retirees money in a health account that they can use in a private exchange to buy supplement health care coverage, dental and benefit plans. >> it is really about one thing, that is sustainability, predictability, they want to know not just what our health care costs are this year, next year, what might they are in three, five, ten years. >> reporter: rather than one group plan, the retirees compete in the plans and the competition can mean lower costs on both sides. >> in some ways, this is a very subtle way in which they get health benefits, but for the retiree it looks and feels much different than it is. >> reporter: they agents who help the retirees to explore their options, with major clients it is the nation's
largest private medicare exchange, handling benefits for 500,000 retirees. it is completely voluntary for companies to offer the health insurance for the retirees, most only offer it for their legacy retirees under health care contracts. the number of big firms offering the retiree health care coverage has fallen sharply from 40% in 1993 to just sentence%, it gives the large insurance companies a way to provide coverage. >> for the first time, they can say we're allocating these dollars in a very fixed fashion and can get a real fix for the costs five or ten years out. the net result is it allows the companies to stay in the game of providing coverage for their retirees. >> reporter: benefit analysts say they expect more retiree coverage announcements as enrollment season nears this
fall. for nightly business report, i'm bertha combs? >> shares in ibm went up 7% today, the benefit company owns the insurance changes that we mentioned that contracted with ibm. and now, 100,000 big blue retirees are expected to become towers watson customers. >> and joining us to talk about the more workers moving to private insurance companies is john grasso, welcome, good to have you with us, let me ask you a couple of questions, these exchanges will be used for medicare recipients to buy supplement and health care policies, am i right on that basically? >> that is correct, it is individual coverage, medi gap, and individual part d coverage. >> forgive me for being dense about this, john, but what happens here?
if i'm a retiree from time warner where i did actually used to work, what are they going to do? are they going to give me money to then go out and shop on this exchange and compare plans? how is it going to work? >> that is right, most companies will give the retirees a tax effective premium subsidy, partner with a private insurance company, and help them find plans in their own zip code that will help them meet their needs and provide agents that will actually work with them and provide them the right plan. >> you know, john, it sounds like a win/win, more choices, ability to shop around, therefore price comparisons, but what are the cons? some of the challenges looming out there. >> sure, there are challenges to consider, it is important to know how they put together the subsidy program, it is likely they can't keep up with inflation long-term, which means
more out of pocket down the road for the retiree than otherwise. so there are some challenges there. in general, i think it puts more responsibility on retirees to understand the health care market, make those health care dollars stretch longer, plan for the future in a way they may not have had to think about in the past. and then finally, the individual market is very local. there are hundreds and hundreds of plans out there, so much choice for retirees to understand. there wouldn't be a national plan design or a premium for the entire group to pick from anymore. they really have to figure out what is in the longer level. >> and john, i can see where this is a great thing for the companies. they can say we're going to give you, i don't know, pick a number, $2,000 a year to pay for the medicare supplement medi gap policies, what have you. and they can raise that number very slowly or not at all, even as the premiums for those policies go up. so it sounds to me like it is a good thing in the long run for the company but a very much less good thing for the retiree who
wants those benefits. >> well, it may be. i mean, without question the planned sponsors have complete flexibility to determine each year how their premium subsidies will grow relative to the past. there are many more choices for retirees to pick from. if they have limited choices in the group plan today and their subsidies are capped today this could actually be a good thing because it gives them more options to stretch the dollars longer, but there are down sides for the retirees, going forward. >> and john you mentioned there is really no national plan, if indeed on the local level these type of exchanges prove to be successful, do you anticipate, though, that the discussion will really take on some serious nature of a national plan? >> well, that is interesting, the medicare advantage plans are local. they're county specifics, you have a very disparate foot plan nationally. you don't have national players in all markets, the individual
that goes for the part d program, the medicare prescription drug program? you will have a patch work of plans out there that the retirees will have to navigate on a county to county basis. >> all right, john, thank you very much for explaining it to us. very complicated. john grasso. coming up, which companies are getting ready to sell shares to the public. we have names on the radar. but first, a look at the stock exchange. >> a few companies are looking
to begin selling stock to the public, the golf course operator club corp holdings filed paperwork for an initial stock holding today looking to value the company upwards at $1.1 billion. >> and also, arrow mark corporation, the company found for schools and businesses and sports arena, helping to raise some $100 million from new investors. and many companies looking to jump start an initial stock option are growing, and the place for those entrepreneurs to sell and how investors can make money is at the annual tech crunch disrupt conference in san francisco. we see where ambitious start-ups make their pitches. >> they will cruise the halls and presentations at tech crunch disrupt. for moving 230 start-ups here,
but the real attraction is the ceos, expected to go public in the next year, for the likes of these two storage companies, this could be one of their last opportunities to make high profile public statements about their company's growth prospects before regulatory filings will be private. >> i think that is why they do so darn well, what is their growth rate? how much visibility do we have in their future earnings. >> twitter has emphasized their success as a partner for tv advertisers, they announce new tools for surfacing conversations, taking on twitter's ownership of the public space. >> twitter is the elephant in the room, he is focused on the
business and doesn't need to say a lot to give people the cause and enthusiasm that twitter is trending in the direction we think it is. >> meanwhile, drop and drop box is showing how they tip the main stream. the ceo is estimating the company's growth to over 200 million users. >> just our expansion, we have offices opening in dublin and in the u.s. in austin, so yeah, there is a lot going on. >> these companies are part of a trend heating up. they estimate that in addition the pipeline of 110 companies look to raise about $30 billion. they're at least 75 companies in the confidential pipeline. estimating at least 70 companies will go public by year end. for nightly business report, in san francisco. >> well, that is going to keep us busy. >> absolutely. >> all right, that does it for nightly business report for
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